Capital Chronicles #16

Hello there! Welcome to Capital Chronicles, saving you hours every week with ~2-3 minute summarised insights from the best venture builders, investors and capital allocators out there. This week: your guide to SaaS burn rates with Kyle Poyar from OpenView, the Madrona team opine on AI the latest fundraising trends and market dynamics, Bessemer Venture Partners release a GTM fundamentals course, and Tidemark share their inaugural Vertical & SMB SaaS Benchmark Report.

As subscriber #TBD, each web link below takes you to:

• A link to the original article (read time: varies)

• Summary / insights / implications per article (read time: 2-3 minutes)

Now, read on for the latest…

🛠️ On venture building…

Your guide to SaaS burn rates, with Kyle Poyar from OpenView. Kyle breaks down the concept of a ‘burn rate’, how quickly early-stage companies use up cash reserves for their loss-making period.

• Why you should read it: the article is a great 101 on burn rates: what it means, how it impacts valuation, when to optimise for growth versus profitability and shares benchmarks for burn rates, collating multiple resources (so you don’t have to). The major takeaway for VC-backed companies is to get to break even / profitability once growth trends below 50% year-on-year. This has been pointed out before from the team at Craft Ventures (see CC#12 or the third video here).

🧭 On venture investing…

AI market observations from the Madrona team. The Madrona Investment team provide an update on the AI startup landscape as of Summer 2024, summarising major fundraising trends and market dynamics.

• Why you should read it: it can be challenging to keep up with the rapidly evolving AI startup ecosystem and market. The authors provide concise highlights of the key trends and current market sentiment. Interestingly, a clear bifurcation is being observed. Q2 2024 saw a 300% year-over-year increase in AI investment, and foundation model companies continue to attract significant funding, with over $7 billion invested in 2024 alone. However, early-stage (pre-seed and seed) AI deals in the US have sharply declined in both value and count.

📖 Learning resource…

Go-to-market fundamentals for software companies, by Bessemer Venture Partners. A 10-part series for taking a software product to market.

• Why you should read it: an accessible yet comprehensive guide covering all the major topics such as product development, lead generation, brand marketing, enterprise sales, PLG methods, channel partnerships and GTM operations. You can jump in and out of the topics fairly easily depending on what’s most relevant to you. If you only read one article, make it the last one: ‘Scaling to $100 million: Ramping your cloud GTM engine.’

📊 Market insight…

The 2024 Vertical & SMB SaaS Benchmark Report from Tidemark. Tidemark collected information from ~250 Vertical SaaS operators to provide industry-specific metrics and benchmarks that no one has publicly gathered before.

• Why you should read it: the perfect compliment to Tidemark’s Vertical SaaS Knowledge Project (VSKP) Framework (covered in CC#9 and CC#11) providing numbers around their strategy for winning in vertical software: (1) win the category; (2) expand offerings; (3) extend through the value chain. The information in the report can be used by executives, investors and operators to benchmark financial performance and inform product roadmap planning.

🎲Lucky dip essential reads…

• Mapping real-time conversational voice AI agents

• Expressing strategy as a series of beliefs

• Turpentine master plan

Share this edition using the link below and get access to…

• Full database: of 200+ frameworks, market insights and learning resources powering Two by Two. Filterable and growing daily! (1 referral)

• Investment toolkit: tools, templates, and how-to guides to help you evaluate and analyse venture investments. (3 referrals)

Before you go…

• Feedback: like (or didn’t) like this edition? Let me know!

• Share: could a friend (or two) benefit? Forward or share this article.

• Access: looking for the full Two by Two Playbook? Check it out here.

• Partner: interested in partnering? Learn more here.

Have a great week!

Josh